We spoke on this subject a few weeks back. Now Russia and China are climbing on board.
What this does is basically do away with debt. So those holding dollar debts are converted into the new world currency. Whatever value they place on it.
This will definitely dissolve debts, but the debtors are going to take it in the shorts. This will make gold the true world currency. Once the dollar is no more the reserve currency, it can drop out of site.
We spoke of this being the only way to dispose of the trillions without bankruptcy. But then bankruptcy is really what you are doing. Kind of like when a company files for bankruptcy, the old shares are done away with wiping out shareholders. Now the bond holders receive the new shares, selling them on the markets to new investors.
This is what will happen should we adopt a world currency (which looks likely)
Fixed income investments are going to get clobbered.
2 comments:
I find it hard to believe that the Chinese are ready to dump $3 trillion of their hard earned (and devalued by now) money and jump on another currency without the backing of a real country behind it.
If history taught us anything was not to trust anything coming out of the Chinese. They say one thing and do the other.
At the beginning of this year they loaded up on more treasury bonds.
So, they cannot be serious when they say something about a new currency and continue to buy US bonds.
I refuse to think they are that dumb to shoot themselves in the foot.
Alex
It is not so much as the value as it is that the yuan will be lower than the dollar. Now they can make an artificial rate and peg into that.
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